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Why you shouldn't invest in the stock market

Why you shouldn’t invest in the stock market

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You should not invest in the stock market because stock market is very risky and highly volatile market. You cannot preserve your capital let alone make any profit unless you have enough experience in stock market. Moreover, stock investing is for intelligent investors. No other business except stock business can kill all the capital within a few days. So, you should not invest in the stock market until you have gathered stock market basic knowledge.

Why shouldn’t you invest in the stock market?

1. Risk

Do you know how much risk in stock investing? In a single word, unlimited. You can’t measure actual risk until you lose  all of your investment. Some stock exchanges have circuit breaker- which is used to control risk and gain. But, many stock exchanges have no circuit breaker. Hence, you have high chance to lose maximum investment amount within a few days. You only can survive if you have enough skill and experience.

Real Example about risk: Why you shouldn’t invest in stock market

I know a person who started stock investing in 2008. He begun his investing nearly 6250 to 8750 dollars. Then, his trading market was excellent. At that time Dhaka Stock Exchange Broad Index was higher high. But, within 1 to 2 years, his capital reached about 112500 dollars.

As a result, his return percentage was 1186% to 1700%. Can you imagine? But in 2010, Bangladesh Stock Market crash killed most of his capital. Some months ago, I asked his wife about her husband’s stock business. She narrated this story.

2. Volatile

Stock market is highly volatile. Before you understand the situation, you may lose your money unless you use stop loss order for trading mistakes. In many cases, many experienced traders suggest that not to invest in share market until you have achieved basic knowledge about share market.  At the beginning, you should invest small amount for one year. In this one year, you can learn the volatility of stock market.

Real Example about volatile market: Why you shouldn’t invest in the stock market

This story is about myself. One month ago, my trading market broad index was high. Market was uptrend. Market RSI and MFI were high. All were buying mood. Later, market begun to enter correction mood. Literally, market lost one month continued uptrend index within one week.  Before understanding the situation and applying donwtrend trading strategy, maximum individual investors lost 20% to 50%.  

3. Trend

Stock market consists of at least two trends- uptrend and downtrend. Therefore, you have to know how to trade trend reversal to make money on stocks. If you learn trade trend reversal, you can earn more. But, if you fail to use trend in your side, you have to fine for your trading mistakes. How much time is enough to expert in trend trading is unknown.

Third story is similar to second story

Suppose, I buy shares at uptrend market. Later, market reversed to downtrend. I have to use the golden rule of stock trading: stop loss to safe my capital. Generally, this event is very common in stock market. A stock can change movement any time. Thus, your gaining stock may turn into losing stock because of trend change. However, trend is also the opportunity for taking gain. Just you need to know how to trade trend reversal.

Do you worry about previous discussion?  

Just think about Warrant Buffet. How did he make money from stock market?  Study about his investing career. If you really worry about taking decision, the next part is for you. Hopefully, you may want to invest in stock market or you have already invested in stock market. Hence, don’t frustrate for above terrified discussion. I have enough good stories to tell you. Just cheer up!!

Why should you invest in the stock market?

Perhaps, you want a good return from stock market. Yes, you are right. If you want to invest for long time, you should select good fundamental stock. Therefore, you need to analyze fundamental indicators such as EPS, D/Y and P/E ratio.

But, if you want to be a trader, you should learn about technical indicators, for example, like RSI indicator, MFI and candlestick chart. Whether you want to become an investor or a trader, you have to learn how to start share investing. Then you should start the stock business. Moreover, for swing trading, learn about how to pick stock for swing trading. For day trading, learn about day trading strategies.

How should you invest in stock market?

1. Take moderate risk and get out of wrong trade as soon as possible.

2. Be care about volatile market. You should stay aside in volatile market. Don’t invest in high volatile market. Wait for sustainable market.

3. Try to use trend in your favor. Buy in downtrend market and sell in uptrend market. If you can not predict the trend, you should wait.

4. Control your fear, emotion and greed. Take decision on the basis of market movement.

5. Learn more about market. Read successful investors’ book.

6. Follow investing related blogs like The Financial Ask.

7. Every day observe the market movement.

8. Apply new strategies and record your failure or success.

9. Correct your mistake early.

10. Safeguard your capital in all situation.

Conclusion

Why you shouldn’t invest in should market? That is a stupid question. Stock investing is a great investment. I read a book about a dancer. He was so passionate about stock market that he lost all his capital in many times, but he didn’t lose hope. Moreover, he spent 3 years and made many mistakes.

Later, He became a millionaire. Do you want to know the name of this book?  Read “To become a millionaire ”. You should spend huge time for learning. Once you have enough skill and experience, you can make up your cost.

Founder of The Financial Ask


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